UnitedHealth Group reported better-than-expected revenue in the first quarter of 2016, despite losses from participating in the Affordable Care Act exchanges. To limit its financial exposure in 2017, the insurer will exit all but a "handful" of ACA marketplaces next year.
UnitedHealth recorded revenues of $44.5 billion in the first quarter of 2016, up 25 percent from the same period of 2015 and beating analysts' average estimate of $43.96 billion, according to Reuters. The company said revenue growth was attributable to growing market demand for UnitedHealth's product and service offerings.
The company's Optum unit — which includes OptumHealth, OptumInsight and OptumRx — fared well in the first quarter of 2016, with revenue increasing 54 percent year over to $19.7 billion.
Revenue attributable to UnitedHealthcare increased to $35.9 billion in the first quarter of 2016, up 10 percent year over year. However, UnitedHealthcare's operating margin fell to 5.2 percent in the first quarter, down from an operating margin of 5.8 percent in the same period of 2015. The margin decrease was partially driven by poor performance on the public exchanges.
Losses from participating in the ACA exchanges are leading UnitedHealth to exit the individual marketplace in several states.
"Next year we will remain in only a handful of states," said UnitedHealth Group CEO Stephen Hemsley during an earnings call on Tuesday, according to The Hill.
Due to expected financial losses, UnitedHealth began signaling it may pull out of state marketplaces last November. The insurer has already confirmed it will stop selling ACA exchange plans in Arkansas, Georgia and Michigan in 2017.
The company now expects to record revenues of approximately $182 billion in 2016 and adjusted net earnings in a range of $7.75 to $7.95 per share, up 15 cents per share from its previous estimate.